Yoshida in Japan: Sharp tripped by engineering ego

The utter lack of any sense of urgency among the Japan's corporate leadership is what's killing the country's electronics industry.

Panasonic stuck with an earlier decision to go whole hog into plasma display panel manufacturing with a gigantic investment (440 billion yen – about $5.5 billion) for its Amagasaki fab starting in 2005. The bet is now costing Panasonic dearly.

The company said this week it will lose almost $10 billion in the current fiscal year as it writes down goodwill and assets while preparing for further restructuring. Panasonic also skipped its dividend for the first time in more than six decades and cut its full-year TV sales forecast by more than a quarter to 9 million sets. Company shares slumped by nearly one-fifth on Thursday, wiping out $3 billion of its market value.

There is some hope, though.

Kazuhiro Tsuga became Panasonic's president earlier this year and issued a decisive order to stop PDP production immediately. That shocked many in Japan.

Panasonic previously had been spreading its own engineering gospel that PDP technology offered noticably better picture quality than LCD, especially in a dark room. Tsuga conducted his own month-long, side-by-side comparison and found little difference in picture quality. Besides, he noted, "most people watch TV with the lights on.”

In the final analysis, it took Panasonic almost a decade – and billions of wasted yen -- to wake up to the fact that PDP was never going to beat LCD.

Sharp management also bought the myth that the success of its advanced LCD panels manufactured in Kameyama fab was assured. It blindly followed an ambitious expansion plan for ultra large-screen LCD panel production. The result? Sharp announced massive second-quarter losses this week and acknowledged “material doubt” about the company’s survival.

Sharp now finds itself on a pace to double it annual net loss to 450 billion yen ($5.63 billion) after taking a $1.1 billion restructuring charge in the last quarter. Its forecasting operational losses totaling 155 billion yen ($1.94 billion).

A rescue deal with Terry Gou, chairman of Foxconn owner Hon Hai stalled over the summer after a tentative deal was reached earlier in the year. Gou had agreed to pay 67 billion yen for a 9.9 per cent stake in Sharp and partial ownership of an underused display factory near Osaka. Now Gou is pressing Sharp to lower its price to reflect a precipitous decline in its share value.

As a result, Sharp is reportedly exploring “other alliances."

Either way, Sharp is running out of time and options. So, too, is Japan, Inc.

Certainly, they didn't have to put everything behind displays.
But the truth is, for many Japanese CE manufacturers, this was about "TV business" (not about "display" business).
You need to understand that TV division at many of these companies has been the main pillar of their business for decades. That means, their division had more sways in getting support and budget in investing further in its business.
Japanese CE vendors could have chosen to buy displays from someone else (which Sony eventually did, but that did not help them either), so that they didn't have to make HUGE investment in manufacturing displays on their own.
But again, remember, many engineers at Japanese CE vendors devoted their lives in developing and perfecting flat panel display technologies of their own. For them, this was personal. It was, in many ways, unthinkable for them to drop their R&D project and walk away from it.
Hence, the engineering ego becomes the issue, while much to be blamed, in my opinion, is the lack of management directions to navigate the changing market and business.
Japanese believed that controlling their own flat panel display technology development and production was to control their own fate in the TV business, which Samsung managed to do successfully.

Iniewski, I gotta tell you. I never wanted a plasma. Yes, in the early days, they had greater contrast than LCDs and they were bigger. But they were always power hogs (you could easily feel the heat emanating from them), they were for the longest time only ED quality, meaning 480 lines vertical, they suffered from burn-in, so that owners even obsessed over the station ID bugs, they weighed a lot, and they were thicker by far than LCDs.
So I happily waited for LCDs to grow and grow, and for their contrast ratio to increase, until I finally bought one of the earlier 26" ones, happily retiring my previous 25" CRT TV. And then moved up from there.
So, do I think that Panasonic couldn't have helped but believe in Plasmas exclusively? Uuuh, no. That's the thing. It shouldn't matter what people gush over today. What should matter is to see the trends of the technology.

I really don't understand why they put every thing behind displays ?
Aren't there other products like mobiles, players, tablets,....etc to invest in ?
And besides, was it really hard for them to understand that plasma displays are slightly better than LCD displays? Why they needed all this time to realize that? The Panasonic new president simply tried it himself to judge !

To @Bert22306, plasma display is technical superior in many ways, I remember the days that everyone wanted one so you can't blame them for pushing it...I was surprised myself when LCD beat it and too over the market, so much worse picture quality...but then OLED is going to kill LCD shortly so the story continues, you have to be nibble in this business and Japanesse corporation seem to be too slow in reacting to changing market conditions and users preferences...I suspect this is rooted in their culture...they do much better in automotive biz because cars have essentially not changed much in 50 years (they only piled lots of electronics into it)

Billion-dollar commitments to a single technology never succeed. If it takes so much investment, it's clearly not the simplest or most practical path at the moment. Especially with the irony of calling it the most "cost effective" choice. Unknown costs always linger somewhere along the way, and always exceeding initial revenues. But these technologies have so much irrationality behind their catchy 3-letter acronyms like PDP, EUV, PCM, it approaches addictive behavior.

So, CRT displays are to Sony what plasma displays are to Panasonic? The eventual success of LCDs was almost inevitable, as far as I could tell. Too many advantages to pass up (power consumption, weight, bulk, pixel count, relative immunity from burn-in problem that plagued CRTs and PDPs).
But why tie the past and the future of Japan Inc. only to disply technologies? Apart from companies like Sony and Panasonic sticking doggedly to their original "favorite" display types, wasn't their slow adoption of digital personal electronics also a big factor? Like, the Walkman that never morphed into an iPod-like device?